Reform? Port Authority puts off vote on $1.2B loan deal

The “podium” foundation for 3 World Trade Center rises above the construction fence on Church Street in New York, bracketed by the 4 WTC Tower and the Transit Hall “Oculus” in front of it. Developer Larry Silverstein is seeking $1.2 billion in loan guarantees from the Port Authority to complete tower 3
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Port Authority officials indefinitely put off voting on guaranteeing at least $1.2 billion in loans to Silverstein Properties to build out the rest of 3 World Trade Center, a sign that perhaps things no will longer be business as usual at the authority.

"We decided not to have a vote today and to work with Larry Silverstein to complete a hybrid financing structure to reduce Port Authority exposure," said Scott Rechler, the vice chairman of the Port Authority's board of commissioners. "We've decided to make it our primary focus to develop hybrid financing using public private funds."

Rechler made the announcement that more private financing would be sought at the authority's subcommittee on World Trade Center operations Wednesday morning. Last month, commissioners were divided on whether to guarantee loans to Silverstein. That division wasn't evident at Wednesday afternoon's full board meeting.

"Our debt capacity should be reserved and will be reserved for transportation projects, said Commissioner Kenneth Lipper of New York, who was the most vocal critic of a loan guarantee last month. "Naturally, any developer would want to use other people's money and not give up his equity. As long as there is a possibility the public would be willing to give him money without him having to give up any of his interest, why would he have any incentive to go to the private sector?"

Authority officials declined to say when they hoped to return with a potential contract for the board to consider or to identify potential private investors which could fund construction. Silverstein officials previously identified Group M, a media investment company with offices currently on Seventh Avenue in Manhattan, as a tenant, which could move 3,000 workers to 3 World Trade.

"There is no deadline and there is no time line," said Patrick Foye, the authority executive director. "Obviously, time is of the essence with Group M. It's most important to get it done right."

Foye said while the board is committed to moving forward, it has three goals in a revised agreement: to reach a deal that makes sense for the authority, to lessen the risk and to make sure the authority is compensated for any funds it guarantees or spends.

Silverstein said in a statement that the authority's decision surprised him.

"Over the past month, we felt we had made substantial progress on the terms of a 3 World Trade Center agreement. Having agreed to the requests conveyed by Port Authority leadership, we are surprised that the discussions did not yield a successful resolution," he said. "We remain committed to working with the Port Authority to reach an agreement that accomplishes our shared mission of building 3 WTC."

Foye replied he was "surprised they were surprised."

Rechler cited strong real estate activity in lower Manhattan as one of the reason for proceeding with an agreement.

"The activities are there. The demand is there," he said.

Commissioner David S. Steiner echoed some of last months feelings about the authority being in the real estate business.

"I say: Let's fill it up and get out of the business," Steiner said.

Critics told the board that if the downtown market is so good, Silverstein shouldn't have trouble obtaining private sector financing for the tower, allowing the authority to use its borrowing capability to fix transportation infrastructure such as the aging and crowded bus terminal.

"How about a private/private partnership? He (Silverstein) is doing what is good for his business. You should do what is good for the public," said Margaret Donovan, co-founder of the Twin Towers Alliance, a Port Authority watchdog group. "The worst thing you can do is approve this deal."